When the city paid $1.2 million for a vacant downtown lot in 1989, the purchase left some City Hall insiders asking whether the city got snookered. The source of the speculation was the quick profit made by Whitaker Investment Corp., which had bought the land just seven months earlier for $780,000.

Back then, the explanation from an outside consultant was good timing and good fortune for the developers – and bad timing for the city.

Location: Less than half an acre on Broadway

History: Bought in 1989 for $1.2 million to build a new City Hall Current use: Weekly meal site for homeless people

Prospective buyer: Center City Development Corp.

Offering price: $5.1 million

Proposed use: Fire house and housing

Now city officials say the time might be right to sell the half-acre lot on Broadway, across from the San Diego Police Department. Nothing was built on the land, which is secured by a chain-link fence topped by barbed wire. Its only use is as a weekly meal site for homeless people.

The idea in 1989 was to use the lot and some surrounding property for a new City Hall complex. Real estate department agents questioned the high price, but the consultant who evaluated the deal concluded that while the rate of appreciation was high, the cost was "reasonable."

The city borrowed money from the water department to pay for the land, according to city records. In a recent interview, Daniel Whitaker, who with partner Gary Earle turned a quick $420,000 profit on the sale, said he figured City Hall sweetened the deal to avoid a lengthy condemnation proceeding for his property. "When the city came along with an offer we thought was a lot more than the market value, we jumped on it," said Whitaker, whose company has bought and sold downtown property for decades.

In 1990, a city property agent suggested leasing the land as a parking lot for $21,400 a year. But the deal went nowhere, and the council allowed a charity called Urban Safari to use it as a place to feed hungry people. The land's value had sunk to $665,000 by 1998, barely half what the city had paid for it. Then-Councilman Byron Wear recommended selling it to Centre City Development Corp., the city's downtown redevelopment agency, for $400,000, but that deal fell through.

In 2002, the city estimated the land's value had risen to nearly $1.4 million. Now Centre City Development Corp. wants to buy it for $5.1 million to build a fire station and multistory housing complex.

Under city guidelines, other government agencies get first crack at surplus property. If CCDC gets the parcel, the fire station and apartments would be built in separate phases and financed with new taxes generated by downtown development. "We hope the item will go before the council in the next couple of months," said Janice Weinrick, the development agency's vice president in charge of real estate.

Money from the sale of city property usually goes into the capital outlay budget. In this case, however, the city must first repay the money it borrowed from the water department to buy the land. Including interest, the tab now stands at $3 million.